CEO Transitions

This past week was a remarkable one in the technology business. At the start of the week, Steve Jobs passed the leadership of Apple to Tim Cook and at the end of the week, Eric Schmidt passed the leadership of Google to founder Larry Page. Apple and Google are two of the most important technology companies in the world and the leaders in the mobile business which is certainly the next frontier in tech. These two moves have me ruminating on the role that CEO transitions play in the development of great companies.

I have been involved in many CEO transitions in my time in the tech/startup/venture business. They are a time of great opportunity and great risk for companies. Getting the right person in the corner office at the right time is absolutely critical and not particularly easy.

In 2010, two of our most important portfolio companies went through similar transitions to what is going on now at Apple and Google. At the start of 2010, Etsy's founder Rob Kalin reassumed the leadership role at Etsy, replacing Maria Thomas who had replaced him 18 months earlier. And near the end of 2010, Dick Costolo took the leadership role at Twitter from founder Evan Williams (who had two years prior taken the leadership role from founder Jack Dorsey).

In all of these transitions you see one kind of leader, the founder, who represents the soul of the company and often also is the "moral authority on product" to use a term I take from my friend and colleague Peter Fenton. And you also see another kind of leader, the operating executive, who will bring order, focus, calm, and execution to a business.

There are periods in a company's life when the founder is the better leader and there are times when the operating executive is the better leader. And there are times, like what is certainly the case at Apple, where you have no choice. There are not many founders in a given company (at Twitter we are blessed with three, Google is blessed with two), but there are certainly plenty of talented operating executives in the world. When a founder cannot serve any more for whatever reason, then you must find someone who can ably replace them. Ideally that person, like Dick Costolo and Tim Cook, will come from within. An internal transition of leadership is much less intrusive than an external transition of leadership.

If you have an operating executive in the leadership role, you should try as hard as you can to keep the founder(s) close to the business and engaged and involved in the key strategic issues facing the company. There are some issues that the founders simply know best on and they must be consulted to and listened to when they come up.

Ken Auletta wrote what I think is the best piece on the Google transition yesterday for the New Yorker. Ken says:

According to close advisors, the Google C.E.O. was upset a year ago when co-founder Larry Page sided with his founding partner, Sergey Brin, to withdraw censored searches from China.

That issue, Google's role in China, is exactly the kind of strategic issue where the founders probably know best. I posted my thoughts on that at the time.

Another key strategic issue is whether to sell the business or keep going as an independent company. Just after Twitter's leadership passed from Jack Dorsey to Evan Williams, Twitter was faced with that issue. Evan Williams wrote an amazing memo to the board on the subject at that time that is among the strongest acts of founder leadership I have ever witnessed.

There is no right answer to the question of who should lead a company. It should not always be the founder, although founder led companies are often the best companies. And it should not always be operating executives, although talented operating executives will clearly be needed in every great company.

In a perfect world, you will have a team at the top of a company that includes the founder(s) and a group of top notch operating executives. They should operate as a team and like, respect, and engage each other in the key issues. The person who is making the final call may change from time to time. In times when you need great creativity and risk taking, you probably want a founder in that role. In times when you need focus, discipline, and execution, you probably want an operating executive in that role. And if you can't have a founder, like Apple right now, then you want the next best person, whomever that might be.

Too much change at the top can be bad for a company. A CEO for life can be bad too. Something in the middle is probably better. And if you are going to have change, evolutionary change where the company has time to get to know the new leader before he or she is elevated is ideal.

I suspect the changes at Apple and Google will be largely non issues for the companies in the near term. I am particularly inspired by the idea of Larry Page in the leadership role at Google. That company could use a period of "great creativity and risk taking." And I am sure that Tim Cook will prove to be a steady hand at Apple, building on top of the amazing work that Steve Jobs has done. Likewise, I am very pleased with the changes that transpired in our own portfolio companies in 2010 and am feeling very good about their prospects this year.

I'm looking forward to the discussion of this topic in the comments. It should be a good one.

#VC & Technology#Web/Tech

Comments (Archived):

  1. Tom Labus

    I believe that the original Apple business plan called for the founders to be out of management within 5 years. It seems that VC’s didn’t think that founders could also manage or lacked certain day to day skills. We’re a long way from that time frame but I still it’s hard to find talent that can both create and also run things day to day.Congrats on your Crunchies Award!!

  2. William Mougayar

    Few CEO’s can be great at both operational and visionary stuff, whether it’s a small or large company.As if this separation has been accentuated even further in recent years. I wonder why.Take Mark Zuckerberg. He’s definitely the visionary, but I’m sure he has a strong operating team. It’s definitely a cyclical thing as you said. At times, the vision must lead, at others it’s back to operational basics. I recall when Gerstner took over as IBM CEO during their ailing time, one of the first things he said “The last thing IBM needs is a new vision”.

  3. Matt A. Myers

    As a founder I know at some point that someone else will probably come in as CEO, whether because I am heavily focused on product development or what not, but my biggest fear is that things will start going in the completely wrong direction. Primarily the fear comes from “losing control,” but a direction that’s purposely been avoided for some real theories, perhaps proven or known, is a very real concern.An experienced CEO might know better otherwise, but those debates/discussions would need to occur – so I strongly agree with Fred that having a founder involved in decisions is critical.

  4. Eric Leebow

    Interesting post. I think there’s a great correlation with founders who have a big vision or original idea, they tend to be the best for the companies when the company has a clearly defined mission and knows its vision, they are good for the company. When the founder leaves, and the mission isn’t as clear as the original founder envisioned, or the company goes into too many directions, it seems that the CEO who came back from founder can hurt the company. This is what I think happened with Yahoo, they spread the company too many places, yet it’s less likely to happen with Google. Some say that Google’s search has declined, or it’s becoming less relevant, yet as soon as they find a search engine that becomes more relevant, they may be in a position to attempt to acquire it. They’ve already done this by acquiring companies such as, yet product recognition is just one component of search. I was reading this blog here on how we need a better Google: CEO of Google will need to see articles such as this and do something about it, as they’ve got a big mission of “organizing the world’s information” and it’s interesting to think how they are going to better organize the information in years to come. I think a lot of the information must require humans to organize it beyond robots, and I’ve done a lot of research on this. In fact, I know what Google needed to do years ago, and was proud of myself that I helped them with coming up with some of the brilliant ideas that created their future products.

  5. Aaron

    I too am excited about the prospects of Page leading Google through a period of creative risk taking.The company I work for is going through the longterm transition of a founding CEO to an operational manager CEO and the leadership team developing with him. There is obvious turbulence as the new operational manager has his ideas for improving the business and the founder slowly relinquishes, sometimes with hesitation, his grip on the day to day.Thanks Fred for your insightful posts.

    1. fredwilson

      what you’d hope for in the situation you describe is a partnership between the founder and the new CEO. sadly, it doesn’t always develop

      1. Scott Barnett

        This is the “head vs. heart” aspect of leadership. Having been both a founder (where a new CEO was brought in) and a CEO brought in to an existing team, I can tell you first hand that my decision making was absolutely different at both companies. Founders have an emotional attachment to their company that give them profound advantages that cannot be bought or replaced by somebody who wasn’t a founder. At the same time, those emotional attachments will cause them to make decisions that are not necessarily in the best interest of the company overall, such as RIF’s, changes in strategy, etc. An incoming CEO will lead more from their head, which can lead to less emotional and more focused decision making, but without the historical information, knowledge and passion of a founder they simply can’t be the soul of the company, no matter how well they do (like Eric Schmidt).

  6. Chipwelsh

    Eric Schmidt had it right – the founders at google are now such righteous ego maniacs that they think Google is omnipotent and can dictate to the Chinese government – which just hurts the average chinese web user and gives the China market to another competitor that will challenge google in the future – hey, when you are worth $15Bn you can make these kind of selfish calls – but you are endangering the rest of your colleagues futures too – one of the problems with “founders” that hit huge home runs is they start to believe they can do anything (all of the media and their colleagues reminding them of what geniuses they are..) – the hubris that is Silicon Valley’s greatest asset is also its greatest flaw…

    1. fredwilson

      i totally disagree

      1. Chipwelsh

        really, other than good cocktail party conversation for the founders (so brave, so smart!) and competitors (yippee!) you can make a case that exiting china was a net positive for google stakeholders? i.e. employees in china/world, widows/orphan shareholders , users/dissidents…let’s hear it

        1. fredwilson

          it is inconsistent with google’s mission to provide a censored version of its service

          1. Dave Pinsen

            Wasn’t Google getting beaten in search in China by Baidu anyway? It’s hard to imagine the Chinese government would let a foreign company dominate search in China. Ceding the search market in China may have been pragmatic as well as moral.That said, Google has been accused of practicing some censorship outside of China as well.

          2. Chipwelsh

            If this is a “core value” that has been stated consistently then why did they even go into China in the first place? Chinese censorship has been going on for decades…. As an investor this issue needs to be clarified – what are the other core issues that will prevent Google from entering other markets? These are very expensive decisions…

    2. Aaron Klein

      I couldn’t disagree more if Google wants to stand for freedom of speech, refusing to bow to political censorship is an important way to exemplify that value.Technology can be a more powerful force for ending totalitarianism than even our military, if we hold true to our values.

      1. JLM

        I don’t know, Aaron, having been a Ranger I think our military is pretty good at ending totalitarianism when given the right rules of engagement. Maybe not.I used to enjoy nothing more than ending a bit of totalitarianism myself.

        1. Aaron Klein

          Please don’t think my comment in any way minimized the role of the finest men and women on the face of planet Earth. They are truly American heroes!But our own GDP can only fund so much military spending. With technology, China is spending its own money on giving people a taste of the free world. I believe they are planting the seeds for a free China with their own spending.

          1. JLM

            No offense taken and none detected. Just kidding.I am amazed at all the happy horseshit that is currently being focused on China.These guys are brutal dictators and their ilk has murdered 70MM of their own countrymen. Just because they are wearing very nice Hong Kong suits does not mean they are anything else.The Chinese have execution vans to kill off dissidents and criminals. They come to the ‘hood, conduct a sham trial and execute them on the spot.These are guys who while hosting the Olympics — China’s coming out party — were willing to cheat on the age of the gymnasts.The Chinese are trouble — witness N Korea, silent subs, satellite warfare, cyber warfare, aircraft carriers — developing primarily offensive weapons aimed at the US.The government itself uses Microsoft software and only one in ten copies are lawfully acquired and registered. This is a lawless society run by brutal dictators. Look at Tibet and Taiwan to see the real hand of China.

          2. Aaron Klein

            I know I’m an optimist at heart, but I believe technology is going to play a key role in giving people the tools to end not just corrupt governments, but also totalitarian ones like China’s current regime.American values are on the right side of history.

          3. JLM

            The optimism in your writing coupled with some old fashioned toughness is exactly what this country and the world needs right now.We ARE on the right side of history. Our values are still the beacon which guides the world.We have to be willing to be forthright enough to just shout it out.What technology is doing is bringing sunlight to bear on the bad guys. When you and I can sit in our homes and see and read about Chinese brutality in its hinterlands, then something can be done about it.That something, however, is not to have a State dinner for a brutal dictator.

          4. Aaron Klein

            Agree completely but don’t miss the other end of the technology.Not only can we see but they can organize and network and communicate and eventually…revolt.Sure it’s illegal to access satellites or use twitter. But the day is coming as technology progresses when it will be all but impossible for a totalitarian government to keep its people locked up behind a curtain of oppression.And then, the Great Wall will fall just as the Berlin one did (figuratively this time) and a great civilization will someday join the community of freedom.It’s just a matter of time.

          5. ShanaC

            It worked with Russia and the Commies (somewhat)

          6. Dave Pinsen

            Did the Terminator series of movies have no impact on you, Aaron? Skynet? 🙂

          7. Dave Pinsen

            For a more nuanced take on China, see my response to JLM in yesterday’s thread.

          8. kidmercury

            “Please don’t think my comment in any way minimized the role of the finest men and women on the face of planet Earth.”no worries aaron, the 9/11 truth movement was not offended by your words.

          9. Aaron Klein


      2. Dave Pinsen

        Technology can also create a new totalitarianism. Google’s Street View snooping technology was a foretaste of that.

        1. Aaron Klein

          Dave, I think you’re very right. We have almost as much to fear from big business as we do from big government. 🙂

          1. ShanaC

            Well, we define cultural norms around technology – what do you think we should do to let freedom ring?

          2. Aaron Klein

            “Eternal vigilance is the price of liberty”

          3. Dave Pinsen

            I hate to disagree with someone who’s agreeing with me, but I don’t fear most big businesses at all. Google is unique, though, in its scope and ambitions. Christopher Caldwell was on to something when he wrote “Government by Search Engine”.

          4. Aaron Klein

            I’m speaking in relatively general terms but there comes a point where massive businesses stop innovating and try to block competition and innovation to keep the good times going.There are certainly exceptions to the rule. I’m not necessarily putting Google in the category. Big telecom companies would probably be at the top of my list. 🙂

      3. Chipwelsh

        Google is just a company doing business in the world – let the President of the US and the EU deal with the freedom of speech/censorship issue. China has issues that are slowly resolving – okay maybe too slowly – in time we all hope they eliminate the need to jail dissidents and censor – maybe it takes 25 years- hey, we used to jail kids for 25 years for weed and still allow nuts to own hand-guns.Americans get on the high horse of all-knowing what is the right thing to do for other cultures and societies – i too don’t believe in totalitarian regimes – but that is not Googles place in the world – let the US president/Secretary of state/EU fix these issues. Again the hubris of the Google founders to “take on China” is laughable….(I guess Google should leave Russia, Venezuela, Saudi, Egypt…..)Using technology as a “powerful force” is exactly what China fears most – and they fear western involvement too in the form of financing it (should they be concerned about western spies in China trying to foment revolution and steal military secrets? ) – the dissidents know the rules and so does Google – quietly figure out a tech way (not difficult) around them instead of bailing and losing a critical market for the present…and building a formidable competitor for all of Asia at the same time – perhaps financed by the Chinese military.

  7. ErikSchwartz

    What everyone forgets about Apple (partly because many tech bloggers were in diapers at the time) is that really strong execs came in very early on. Mike Markkula was brought in as chairman and employee #3.

  8. Sachin Agarwal

    I’d be very interested in reading Ev’s letter. Given how much time has passed, I can’t imagine it would hurt the company at this point.

    1. fredwilson

      i am reading Daniel Patrick Moynihan’s letters. i don’t think he would have wanted them read while he was alive. same treatment should be afforded to Ev’s letters.

      1. RonM

        Love Daniel Patrick Moynihan’s letters. Cannot believe he never ran a negative ad in his life and still became one of the most respected elected officials of the modern era.

      2. JLM

        I love reading collections of letters and papers. It is really illuminating to read someone’s contemporaneous utterances.I have read Marshall’s, Eisenhower’s and Reagan’s letters cover to cover.The most intriguing are Reagan’s because everybody thought him to be such a dunce. His written words are extensive and his correspondence betrays his brilliance and sensitivity.His letters to Gorbachev and the rejected State Department edits are incredibly illuminating.The magnitude of credit he deserves for having defeated Communism cannot be overstated. It stands out clearly in his letters.

        1. ErikSchwartz

          The thing I never understood is; was the policy to spend the Soviets into the ground with SDI or did they actually believe stopping only 90% of 20,000 nuclear warheads would make any meaningful difference to the post war outcome?Did Reagan know he was bluffing?

          1. JLM

            One of the greatest threat overstatements in the history of the Cold War was the Russian nuclear arsenal.They were over counted and their capabilities over stated.Their technology is not very good.This is the nation that mass produced the seemingly inferior T34 in WWII because they could not compete with German technology but could overpower it by out producing them 5:1. The Russians have only prevailed when they could deploy great numbers of soldiers, tanks and artillery — not tactics and generalship.The Russians have never mastered naval aviation. They have a single aircraft carrier which literally cannot operate out of sight of land.We knew where every Soviet boomer was located at all times and we had a hunter killer sniffing up their skirt when they passed Iceland-Ireland.The Russians had copper circuitry when the Americans had gold. If you know what that means, then you know what that means.The revelation that the Russian May Day rocket carriers were not compressing their tires (because the launch tubes were empty) was a well know secret for 20 years before the NYT got a hold of it.So, I think Reagan was playing the Russians pretty damn hard. And knew it.One should read the personal exchange between Reagan and Gorbachev to get a good handle on how shrewd Reagan was.

          2. Dave Pinsen

            “This is the nation that mass produced the seemingly inferior T34 in WWII because they could not compete with German technology but could overpower it by out producing them 5:1. The Russians have only prevailed when they could deploy great numbers of soldiers, tanks and artillery — not tactics and generalship.”You are being far too broad in your indictment of Russian technology, tactics, and generalship.When the Germans invaded Russia in 1941, the T-34 was the superior tank. Only later in the war did newer German tanks surpass its capabilities, while the Russians basically kept the design of the T-34 static. Too little and too late by then, for Nazi Germany. Although Russian technology in general was lacking, the Russians did make some effective weapons. The T-34 was one example (a later example was the AK-47).It is true that Russians lapped the Germans in tank production. They mobilized their economy for total war as soon as Germany invaded, and moved their armaments factories east to the Urals; when Hitler was told about Russia’s tank production numbers, he didn’t believe them at first. In his arrogance, he had launched a war of annihilation against the Russians without similarly mobilizing his country’s armaments production.It’s also true that, at the beginning of the war, Russian tactics and generalship were inferior to those of the Germans — that’s because Stalin had purged his Army of some of its most talented officers a few years before. But there were some notable exceptions, such as Zhukov.Antony Beevor noted that before the Germans invaded Russia, most foreign intelligence services had a low opinion of the Russian military (based mainly on how the outnumbered Finns bloodied them during the Winter War). The lone exception was Japan. The Japanese had faced Zhukov in battle, on the border of Mongolia, in Khalkhyn Gol, in 1939 and had gotten their heads handed to them.

          3. JLM

            I know nothing about the 1939 Jap v Russ war. Can you recommend a good book?

          4. Dave Pinsen

            I don’t know of one. What I know of it I learned from Beevor’s great book Stalingrad: The Fateful Siege and some additional reading online.

          5. JLM

            I do not disagree with you at all. I admire the Russians for having embraced an “inferior” tank which they could mass produce and thereby make up battlefield losses and stand up new units quickly. In the end, it was the sheer size of the landmass and the depth of the population which defeated them. Oh, yeah, the winters.In the early going, it is very difficult to find much wrong w/ German tactics, soldiering and execution. They routinely defeated the Russians at every turn even when hugely outnumbered. German armored tactics — Guderian — were the key. Of course by that time, the Germans had Poland and France under their belt and had wrung out quite a few bugs.The big German advantage was the “88” which was used in direct, indirect, anti-tank and anti-aircraft roles. It was a hell of a gun and one you could shoot straight.German equipment was better than most armies they fought on a case by case basis but, as you point out, they did not get a lot of it into production quickly enough. Their jet fighters could have made a huge difference earlier in the war.I once listened to a lecture by Chuck Yeager who had shot down a couple of them in a P-51 Mustang. He went on and on about how much better the ME-262 was than anything in the sky except for fuel capacity. He used to follow them home as they ran out of fuel and get them as they were coming in to land.

          6. Dave Pinsen

            You elided my point about the T-34. It wasn’t an “inferior” tank at all when it was first introduced; on the contrary, it was the superior tank in 1941. An illustrative quote from Wikipedia:One of the first known encounters with a T-34 was by the 17th Panzer Division which spotted it near the Dniepr River. The T-34 crushed a 37 mm anti-tank gun, blew up two Panzer IIs and went on to leave nine more miles of destruction in its wake before being destroyed at close range by a howitzer. The appearance of the T-34 in the summer of 1941 was a psychological shock to German soldiers, who had been prepared to face an inferior Soviet enemy; this is shown by the diary of Alfred Jodl, who seems to have been taken by surprise at the appearance of the T-34 in Riga.The Germans did make better tanks toward the end of the war, but their tanks at the beginning of the war weren’t the best. And, of course, no one else had anything like the jets the Germans had at the end of the war, but again, that was too little too late (Yeager’s autobiography, btw, was good read).The biggest advantages the Germans had against the Russians initially were the result of the Stalin hamstringing his own military. He ignored British intelligence warnings that the Germans were planning to attack, so his military was completely unprepared for the attack. He had put most of his army’s best officers in the gulags, and he further hamstrung his army by pairing line officers with political commissars. Zhukov eventually prevailed on Stalin to reestablish the authority of the officer corps, but the commissar set-up stymied initiative. But the Russians did learn from their initial mistakes, eventually.

          7. ErikSchwartz

            I don’t disagree with much you’ve written.The thing about a MIRV’ed ICBM is it is not technologically very complicated once you’ve got the basics down. Spoofing SDI is orders of magnitudes easier than actually making it work. In a vacuum, on a ballistic trajectory, a $5 mylar balloon and a nuclear warhead look the same until they reach re-entry (when it’s too late). Even now 25 years later with vastly better sensor systems and targeting SDI works when we know a launch window and location, but still is only 90% effective.As for the technology of WW2, The US were in a similar position vs German armor to the soviets on land. One on one a Sherman would not often beat a Tiger. But we built lots of Shermans. At the end of the day the Germans never even made it half way to the Urals. They had no real strategic capability to impact soviet manufacturing in a meaningful way. The fate of Germany was sealed on June 22 1941, there was no way for Germany to win in the east. Even if the US had not entered the European war the Soviets would have defeated the Nazis alone.

          8. JLM

            Agree completely. Classic defense in depth trading ground for absorbing combat power energy and lengthening supply lines to the breaking point. And then the WINTERs!

  9. Roland Haddad

    In my opinion, Tim Cook will need a tremendous effort to build his image as the new Apple ambassador. The challenge will be to create in the minds of customers an association between the future products and the leader of such company. Why? What many like about Apple is this personal relationship Jobs has created with his market since its early days. Will Cook be able to match that? Another question that comes to mind: Will Cook be able to reinvent Apple like Jobs did when it needed that?

    1. honam

      I have the same questions. That said, I think Steve Jobs’ ultimate vision for Apple is to create an enduring brand, like Nike or BMW. Consumers have affinities with those brands, not to the founders who are long gone. Apple is already a great brand. Will it stand the test of time, long beyond the founder? Given the unique culture, they have a shot. Given that Steve Jobs is just so extraordinary, it’s not clear any company can live without him. But Pixar is still doing amazing work, long after Jobs is no longer CEO. I do believe Apple has a unique culture/vision which is deeply ingrained, just like Pixar.

  10. David Miller

    I can speak from personal experience how difficult it can be to make the transition. On January 3, my role at the company I co-founded in 2000 changed from being full-time and operational to part-time and advisory. I came to the conclusion that the management structure we had in place worked well for 10 years but was now getting in the way of the company moving forward. I then convinced my partner and my Board that the best thing for the company was for my role to change.My experience correlates with this post: different leaders with different skills are needed at different points along the company’s maturity curve. I doesn’t just happen in high-profile public companies; it happens in smaller companies too, and far more often (we’re $10mm in CMRR and 75 people). It’s extremely tough when one of the affected parties is you.I blogged about my personal experience and what I said to my Company here in case anyone wants to listen to another real-world example of what I think this post addresses:http://www.asoftwarestartup

    1. fredwilson

      i like that you posted the videothat’s a really hard speech to deliver

      1. David Miller

        Toughest thing I ever had to do. I’m glad I recorded it.

    2. Mark Essel

      At 8min in it’s pretty obvious how much of yourself you put into the company, how emotionally connected you are to the business. Powerful move adjusting your perspective and seeing what’s best for your company. Best of luck David!

    3. Greg Cox

      Wow. This is a powerful reminder to do what you love and are best at. As you point out at some point in the video, life’s too short to do anything else. Sometimes staying on the path means making very tough decisions though.

    4. JLM

      Stronger than half an acre of garlic in W Tx. Well played.

  11. Dan Ramsden

    I think that the common ingredient in Apple’s, Google’s, and also Twitter’s leadership changes – at least on the surface – is about execution and efficient operations. Steve Jobs could have picked anyone, but he picked the COO. At Google, the new structure is being described as a way to streamline decision making and enable the company to execute more decisively. If memory serves, Costolo was COO before stepping up? Maybe even the fact that USV’s new fund is a later-stage fund speaks to a similar theme – which is that the sector is progressing into a more mature phase, wherein execution and sound business practices are increasingly the driver.

  12. Michael D.

    I think Apple’s transition will be a little easier since it seems as though their roadmap is fairly well defined for the next two years. This will give Tim Cook time to further define his CEO skills. In Google’s case, at least to me, what’s next? Electric cars, groupon clone,? They need to focus on developing another significant business, measured in revenue, to offset the dependency on search. I think that requires operational focus. I’m not sure if that is what Larry Page is known for.

    1. JLM

      I think you short Apple right after next iPhone and iPad introduction. Nobody there can hold Jobs jock. It will be a slow, steady decline.I personally hope Jobs lives forever.

  13. RF

    I have two perspectives on this topic: 1) I recently became an Operating Executive and am now working alongside one of the Co-Founders and 2) I worked for a PE firm that replaced ~40% of their portfolio company CEOs.1) Last month, I started working alongside a Co-Founder of a business as the Operating Executive. The transition has been smooth, because I was already playing the role of Operating Executive / Advisor before officially taking on the role. In fact, it wasn’t my original charter to take on this role — it just happened naturally as I began working with them on strategic planning. It also helped that the Co-Founder understood the focus and discipline that I would bring was complementary and would not make him redundant. Having said that, my biggest concern is that we have lost our competitive edge, as the Co-Founder and what’s left of his team — since being acquired four years ago — have become more involved in the day-to-day operations of the company vs. the vision.2) At the PE firm where I worked, we replaced ~40% of our portfolio company CEOs. I would say that only half of those replacements were successful. Underlying the 50/50 split is the reality that it’s very difficult to find the right Operating Executive to take over a Founder-led business — particularly from a fit perspective — although in some cases, a poor choice was likely make from a competency standpoint. We also had a few instances where we wanted to replace the Founder but, ultimately, this person refused to let go — even though it was probably best for the company. On this count, I would blame the PE firm for not doing their fiduciary duty.Ultimately, a company needs a vision and someone to execute against that vision. If the vision has already been clearly established — and, more importantly, if this vision is firmly entrenched in the company’s DNA (e.g., Apple) — then it’s easier for an OpExec to have more control over day-to-day execution. However, if the company’s vision is only embodied in the CEO, then the risks are considerably higher until the company absorbs this vision and can carry it on without him/her.

    1. JLM

      How much did the PE firms pay the “new” CEO as compared to the founder?

      1. RF

        Great question. And to be honest, I do not have exact figures to share, though I cannot imagine that it was substantially different than comparable market comp. However, there are several factors that make the comparison apples-to-oranges, particularly since the founders were rewarded handsomely at the time of purchase. Which, by the way, can sometimes lead to another problem: the “cashed out” mentality.

    2. ShanaC

      why so many replacements?

      1. RF

        The short answer is that Founders are great entrepreneurs but not always great Operating Executives who can scale the business past a certain point. Additionally, some would rather take their cash from the sale (a considerable amount) and reinvest it in a new start-up business. Others make so much from the sale that their outlook on life changes because they have some “f#%k you” money (crass, but true).

        1. ShanaC

          thank you

  14. Lyle Pratt

    I think a good example of a high profile CEO switch gone awry is Microsoft’s transition to Steve Ballmer. Bill Gates announced he was stepping down as Microsoft’s CEO in January of 2010. Here’s Microsoft’s chart:

    1. fredwilson

      i agree but i also feel like Microsoft is finally getting some of its mojo back

      1. kidmercury

        damn straight, msft putting the smackdown on everyone. kinect gonna embarrass a lot of people. xbox already does.

        1. Aa Bb

          I think Xbox is one of the best products Microsoft makes. 2nd is Windows Phone 7. Then Windows. Macs are better than PCs

          1. kidmercury

            i find it fun to root for MSFT because i feel like they are theunderdog. but i kinda dislike all tech giants because they start outas liberators bringing us cool technology but then morph into systemsthat entrap us IMHO

          2. fredwilson

            me too. i always root for the underdog. i hate the yankees.

        2. fredwilson

          yup, the twin titans at msft. and bing is good. and people tell me that windows phone 7 is too

    2. Steven Kane

      i try to never underestimate the smarts and startegic mojo of bill gates. so i find it hard to assign too muich responsibility to ballmer. instead i think gates was wise enough to see that MSFT was in for a rough period of stagnation and erosion and painful reinvention… and he didn’t want his legacy to include that

  15. Alex Prushynskyy

    Fred, since it has been a while, is it possible to post that memo from Ev on the Internet? Clearly, I am intrigued…Cheers,APS: ahh, Disregard this, I saw the comment below…

  16. Neil Braithwaite

    I would like to bring another aspect to this discussion if you will indulge me. I am the founder of a fledgling Internet start-up (Curated Social Network) company in Charlotte, NC. When I say fledgling, I mean there are still pieces of egg in the nest. There are several issues I am dealing with that I have yet to wrap my fledgling “start-up” mind around. I worked on the project concept alone for six months and then partnered with a great engineer who built the site. I offered him a large equity stake because without him, I really had nothing but an idea. Next: After speaking with some VC’s and Angel’s here in Charlotte, I realized that I needed someone who not only knows the ins-and-outs of actually running a business, but someone who also has experience with start-up web-based business models. So I recently met with a great guy from South Africa who has the perfect experience and background to get the job done. We hit it off quite well and he is very excited about the project and wants to come on board. Issue: What do I offer him? Should he be considered a “founder?” Is my engineer partner considered a “founder?” I’m also interviewing someone who could head up my advertising – how should I treat them? I also have an opportunity to partner with a single Angel investor who will put up all the capital. What should I offer him? This is all happening so fast, and without these people, it will be impossible to get this start-up moving. I will be the CEO, but given that “stuff happens,” there may come a time when I really need someone invested in this project to take the reigns. So whom should I consider a founder and what stake should a founder have? BTW: Fred, I found you through extensive research regarding Internet start-ups and have been following your blogs and interviews for the last six months. I appreciate your business acumen and style and especially the personal candor you bring to the table. I also appreciate all the great feedback and input from your friends on this blog. You should consider renaming the blog AVCU. After all, it’s not just a blog – it’s higher education.

    1. fredwilson

      i would say you and the engineer are the foundersor you are the founder and he is the co-founderthe business oriented hires are going to be founding team members butnot necessarily foundersall that said, i like how mark pincus called all 1500 employees ofzynga co-founders last night at the crunchies

      1. Neil Braithwaite

        So if you had to step down as CEO, what characteristics would you look for in your replacement. Feel free to drop a name or two if you like.

      2. kidmercury

        sorry you lost to bubbles milner. at least some of your portfolio won, though, so not all is lost.

        1. fredwilson

          i wasn’t there. he was. i’m glad he won. i didn’t want to be marlon brando

          1. JLM

            Well, at least you were a contender!

    2. JLM

      Real world advice — always give the other guy the BIG title and keep the money.This is why banks have First Executive Vice Presidents.

    3. TyDanco

      This blog, and other well known ones (Both Sides of the Table, Feld Thoughts, etc.) are great for bringing up these issues. And the commentary may help you out. But for answering questions, I’d recommend the folks at Venture Hacks, or posing your questions specifically at Quora. Good luck. If any of us had 1/4 of the wisdom of Fred, we’d be twice as smart as we are now.

      1. fredwilson

        i think the AVC community is pound for pound, 10x better than thequora community

        1. markslater

          i know i am a good deal smarter thanks to your posts and the discussions here (some might say that there really was only one way i could go).participation in discussion here will introduce a person to issues they never thought they had an interest in.

          1. fredwilson

            yeah, like how yesterday’s post turned into a discussion about reaganand the soviet union. that amazes me how that happens

  17. Donna Brewington White

    It seems that one of the truest marks of great leadership is having the wisdom, courage and perhaps even the humility to realize that you are no longer the “right” leader for a particular situation. I can think of few things I admire more.I recognize that this does not necessarily reflect the cases in point, but reading this post brought this thought to mind.Fred, you’ve shared in other posts and comments that the question of when/if a CEO transition should take place is one you’ve wrestled with (hope I said this accurately). This post gives a peek into your ongoing thinking about this topic. Sometimes the development of someone’s thinking on a topic is just as valuable as the conclusions drawn…especially given your vantage point and the material you have to work with. Thanks for continuing to share your thoughts…great stuff.

    1. fredwilson

      it’s an ongoing struggle for me and most VCs and board members i know

  18. JLM

    In the venture capital context in which this blog is so brilliantly written most founders are product geniuses and are not particularly focused on running a company.The question is always — are we building a great product here or are we building a great company?There is frankly no right answer if the intention is to monetize your intellectual property.As a guy who has been a CEO for over a third of a century, I can tell you that the ability to effectively run a company is an acquired talent that does not really require much genius.It does require a fine formulation of management and leadership.Most folks can figure out the management component fairly easily — the process of achieving prescribed business goals through the efforts of a team by the artful execution of planning, organizing, staffing, directing and controlling while utilizing human, financial and material resources in an ever changing competitive operating environment.The leadership component — the art of creating and communicating a vision to a team while providing the inspiration, motivation, information, knowledge, methods and problem solving to realize that vision and simultaneously coordinating and balancing the conflicts among the team by making the tough decisions — can be a bit more challenging.Managers have subordinates.Leaders have followers.You have to know and appreciate the difference.When you have to confront the issue as to whether you have the “right” CEO, I will bet you that a careful read of the real world definitions of management v leadership will help you know what you need.There is nothing wrong with building great products but if the delivery system is going to be through a company built around the product, then you have to get the calculus about the management + leadership = success formula right.

    1. Neil Braithwaite

      Quite right JLM.I learned that my late father had mastered the “formula” from speaking to those who worked for him.They told me he was more than just a manager to them. They spoke of how my father turned around a floundering company through his leadership. Many said they were ready to jump ship until he came along.Shortly before his untimely death, he turned down a huge promotion. He said his position as manager was to rewarding to give up.It’s hard to find someone like that today.

      1. JLM

        A successful turnaround is always a product of leadership.There is something magical about knowing what your father has done in life.Recently I had the opportunity to trace the route my father had fought through Italy in WWII.I stood on roads and looked into the mountain passes he had captured from German rearguards.I stood in a farmhouse that he had stumbled on filled with dead Germans who had not survived triage.I looked across rivers he had crossed under fire.And I went to the American cemetery just north of Firenze (Florence) and saw the graves of men he had buried.It was a spiritual journey.When I was in the Army, I stumbled upon some senior NCOs (my Dad ended his career as a Sgt Major though he had gotten battlefield commissions in two different wars) who knew him and they would say — “Your Old Man was a helluva soldier.”That’s like finding out your Dad was the Pope. It’s a great feeling and it leaves me awestruck.

        1. markslater

          while we are on the subject. My grandfather was a spitfire squadron leader in the battle of Britain (squadron 1) – he was and still is an inspiration to me. (he passed too early on the golf course in 1991).I often think about what he was facing as a 22 year old in those days, and what he would tell me today with some of the challenges i face. He received the DFC and retired a group captain in the RAF.on a seperate note we were at a reunion of families of pilots last year on top of the white cliffs of dover and a lady approached my mother and asked if she were the daughter of my grandfather. my mothers reply was obviously yes – at which point the lady responded – “i am the sister you never knew you had”.My grandfather had an affair in France after being shot down during the war behind enemy we really are off topic!

          1. RichardF

            There was an absolutely fantastic programme on BBC4 two weeks ago about the Battle of Britain and the mistakes the Germans made when looking at aerial reconnaissance photos.Churchill was absolutely right when he said “Never was so much owed by so many to so few” If you want a copy of it, let me know, I have it on hard disk.

          2. markslater

            they stopped bombing the airfields and started bombing our cities.then there was the small matter of MK ultra.oh and the small matter or roosevelt building a transatlantic aircrafy component supply chain….whats the name – i’ll see if i can find it – thanks for the heads up.

          3. JLM

            The Battle of Britain by Max Hastings — one of my favorite military authors — was an outstanding story of how the British fought so valiantly and were able to capitalize upon just a very few innovations and a few bad German decisions.That the Germans targeted cities and failed to destroy British airfields was a huge blunder and a blood thirsty and cynical decision which ultimately hardened British resistance.The most important thing is the quality of the leadership at the top of Fighter Command which developed tactics and made them work in the face of massive internal strife and huge losses.I cannot recall the name of the Fighter Command CO who was on the verge of being retired on a number of different occasions who so diligently kept things together but he was a genius and treated shabbily in the end.I am reading Max Hastings’ Winston’s War just now and it is another great tome.I have huge admiration for the British fighter pilots who just flat took it to the Germans with a degree of constant violent confrontation and literally saved their country through blood, sweat, toil and tears.

          4. JLM

            Holy smokes! What a damn story. This is why I love things like Fred’s blog because you meet the most interesting people with the most interesting life fabrics. It is truly amazing.Flying a Spitfire in WWII against the Germans and surviving must be like opening your door and finding Catharine Deneuve (naked preferably and in her prime) with a hand written card with your name on it!”By any chance are you Mark Slater?”Life really does not get any richer than that.The youth of our fathers during WWII, to me, is one of the big insights into humanity. I often talk w/ my 92-year old Dad and we will talk about his experiences in WWII, Korea, VN and the greatest insights are when he was in his 20s in WWII.Not to be overly dramatic, but I am convinced that pure unadulterated evil was let loose on the world in those times and our fathers were the instruments of good which prevented the world from spinning out of control. Had they lost the world would be a very, very different place.

          5. markslater

            yes i am the aforementioned – although often confused with another investment banker named “mark slater” here in the US (he used to be at H & Q).that side of my family was military. Great grandad flew by-planes for the royal flying corps over top the western front. But herein lies my paradox!the other grandfather was court marshalled for shelling a friendly ship while drunk in charge of a defense installation on the southern coast of ireland…..or so the story goes!it goes without saying that this generation of people stand alone in alot of ways, and it shames me to see how mine forgets the sacrifice and ignores the meaning of its you go – he was 257 squandron and then moved to no.1 in 41.

    2. fredwilson

      JLM On Leadershipthat course would be more oversubscribed than the Facebook IPO

    3. vruz

      succintly:* managers manage what already is, and excel at making it function like clockwork* leaders create what never was before, and steer this ship straight into the wilderness of the great unknown.

      1. fredwilson

        that’s a great way to think about it

        1. vruz

          I think sergey and larry have decided they know how to do both without eric’s leash.I can’t wait to see what they come up with.I wouldn’t underestimate the importance of finding a good larry (or tim cook) you can trust your ship to. the number of operative managers available out there is meaningless to you when you think from that perspective: your ideal manager may be a market of one.

  19. JLM

    Further to the notion that CEOing is an acquired talent — kind of like snowboarding v skiing — I was a Company Commander in the Army three times on three different continents.A CC is like being a feudal Chinese war lord able to fight w/ your subordinate units out of your own eyesight and to promote, demote, punish and inspire soldiers in a tough environment.In elite units, you were often initially the least experienced guy in the entire company but nonetheless you were the guy with responsibilities.The first time I was a CC, I had a great company and my experience was an inch deep and a mile wide. I was hanging on by my fingernails always relying upon my instincts buttressed by a great First Sergeant who I had the wisdom of not pissing off.The second time, I was pretty relaxed and able to make good decisions on the fly but always careful to visit w/ the First Sergeant.The third time, I was on freakin’ auto pilot able to make any decision on the fly and willing to take enormous risks of replacing critical NCOs on the spot. My first day, I relieved three NCOs and the second day the Company was running itself. I was in the kind of unit that by that time everybody in the Army in that MOS knew who I was.Most officers did not like the idea of being a CC more than once. You got your box checked and moved on.I loved being a CC as I said — Chinese feudal warlord. But it has its downside also.My unit was conducting training crossing rivers while on patrol. I had a young buck sergeant just back from Viet Nam and I told the NCOs to conduct “realistic” training. He decided that wearing a life preserver was not “realistic” — you can see where this is going.Soldier drowns and I have to deliver his body to his father — eyeball to eyeball — and tell him why his son is dead and under what conditions. You grow up fast when you have to do that, faster when you know it was your fault. Even though I had been 25 miles away.A Board of Inquiry was called and I had to testify. I had a Harvard lawyer. Against my lawyer’s advice, I stood up and simply said — “I was the commanding officer of that unit and I am responsible for everything that happened or failed to happen.” I sat down.The Board of Inquiry absolved me as blameless. I knew better. I should have checked, double-checked and re-checked that training because I had put men in harm’s way. I live with that every day.The whole point of this is — you will become a better CEO as you do some CEOing and you will have to take responsibility for your triumphs and failures. You will grow when you are tested and sometimes when you fail you grow the most.In 30 plus years of CEOing, I have never needed to know more than what I learned when I was a Company Commander. Anybody can do this stuff.

    1. Martin LeBlanc,

      Thanks for sharing this.

    2. fredwilson


    3. Dave Pinsen

      “In 30 plus years of CEOing, I have never needed to know more than what I learned when I was a Company Commander. Anybody can do this stuff.”In that case, you could save your company some money by replacing yourself as CEO with a 30 year old former Army captain who will work for 1/3 or 1/2 your salary, plus a little equity. Let me know when you do that.

      1. JLM

        Actually I have done just that. In the last 6 months I have hired three Captains — all combat vets of Iraq and A’stan — two West Pointers. All with MBAs.I suspect I will turn the company over to them some day.But in the meantime, Dave, I need the job.

        1. Dave Pinsen

          When you do that, I might buy a few shares of your company. I’ve looked at its numbers, and your salary seems a little excessive, to be honest — it’s higher than your company’s ttm net income, according to Yahoo! Finance.

          1. JLM

            Uhhh, Dave, rule no 1 of public companies is no chatter on blogs. If you insist on making such comments, then I cannot continue the conversation nor can I post here any more. I thought we had agreed upon that?

          2. Dave Pinsen

            Considering that neither of us have mentioned your company by name, and that you aren’t posting under your name, I highly doubt that you have violated any rule here. Nevertheless, I understand your reluctance to continue this line of conversation and I won’t press you on it further.You are font of knowledge and experience about many things business-related, and I enjoy reading your comments here as much as anyone else does. But when you elevated experience as a company-grade (i.e., junior) officer in the Army as the ideal education for a corporate CEO, it set off my b.s. meter for the reason I mentioned above.

          3. JLM

            Thanks, I guess. I literally cannot imagine any better preparation for being a CEO than being a company commander in the Army or Marines.Truce.

          4. Ethan

            JLM,Fascinated by your comments here. I’ve never served, but grew up reading almost nothing but military history. (Marine dad + my own interest). Have you read (Navy) Capt. Eugene Fluckey’s book on the U.S. submarine Barb during WWII, and if so what was your take on it? As a mx.-times startup founder, it’s possibly the best “startup” book that I’ve ever read, from his need for strategic innovation, his reliance on oft-unreliable technology, and the constant winner-take-all need to lead and manage a diverse but tight group of ~100 pros under high stress.

          5. JLM

            Ethan, I have not but I will as it goes onto the iPad today. Thanks.I think that you have served in the “military” intellectually with what you have observed from your own Dad.The chaos of a startup — that special brand of electricity and energy in the air — is the same rush one gets from setting out on a mission.I remember going out on patrols and assembling the patrol and giving them the 5-paragraph field order/patrol order and having them “brief back” the plan. The excitement of ensuring that everyone knew the plan and that everyone had ammo, grenades, water, first aid kit, etc.It is exactly the same excitement of a start up.Business is almost always about “making order from chaos”.

          6. Dave Pinsen


        2. GlennKelman

          Huge fan of yours JLM, but this particular discussion has made me uncomfortable: I’m not crazy about leaders who think that their background and traits are perfect, then look for others with the same. And it’s even worse when the leader broadcasts this. How do you think the folks in your business would feel if they knew that you believed the way to the top was by being a Company Commander? My experience of being a CEO has mostly been being surprised by people, but maybe that’s because I don’t have much experience (five years).

          1. JLM

            There are certain things in life which are simply true. Even if we don’t want them to be true or if they make one uncomfortable. As an example — the number one common trait amongst General officers is having been an Eagle Scout.You always have to start w/ the raw material. I look at identifiable experiences as being a way to “screen” for talent. There is no one path to advancement but there is a methodology to identify talent and to coach and mentor it along the right path.While I do not think that any particular set of circumstances or experiences are “perfect” I can say with absolute certainty that the military represents a very tough meritocracy and that the screens provided by getting into one of the service academies, excelling in that tough environment, having served in the combat arms (Airborne and Ranger schools thrown for good measure), perhaps having served in combat and having been a successful company commander are collectively likely to result in a pretty attractive candidate for success in life thereafter.If you have an undergrad in engineering and an MBA in finance, all the better.Perhaps in the anecdote that I laid out I have over simplified the equation as it was not my intention to suggest that was the “perfect” or only path to the top — but it is a recognizable one to me and corporate America is filled with folks with similar backgrounds.Know that amongst academy grads and veterans there is more than a bit of a “ring knockers cabal”. We speak in a code that most of America does not quite get. And mostly does not want to get. Believe me I would do a favor for a former officer at the drop of a hat and routinely do. It is a cult. When you wear a CIB, jump wings, a Ranger tab — you are in the club. Look at the Society of Cincinnatus and divine its original purposes.In my business career, I have lost a single employee over whom I would express any regret. A brilliant young guy w/ a UT MBA that I had big plans for. He broke my heart.The reason I tell you that is because effective leaders have followers and effective managers have subordinates. Big difference.I don’t quite buy into the suggestion that leadership is a more important trait than management expertise. Or that a good man cannot learn both and grow into a role that incorporates both. It is an element of success, but you have to be able to run the shop regardless of how good a leader you might be or become.Last, I guess I would say that individuals have different ways of doing things. What I am attempting to convey in a bit of a short hand method is that this screen has stood me well on more than a few trips to the pay window and that is what I am trying to do. It is a good formula for ME because I understand the moving parts but it may not be a good formula for others.Folks in my company know that the way to the pay window is by working the plan. Not what one did 15 years ago.

          2. GlennKelman

            Probably the best new CEO I know graduated from the Naval Academy and became an XO on a nuclear submarine, so I definitely understand some of what you’re talking about. I’ve also worked with people whose military experience trained them to be ass-kissing politicos.But when I said that the discussion made me uncomfortable, it was just a polite way of saying that I thought you were wrong about military experience being the ultimate prerequisite for entrepreneurial success. To claim your opinion about Company Commanders as objective truth, you’d have to cite some kind of data beyond your personal experience.The data I know of show that most great technology companies are run by people with no military background, so it makes sense to be open to folks who have excelled in military or civilian life. I am not saying this to be politically correct, but simply because I think it is the best way to build a good, profitable business. Talent is in such short supply that to limit yourself to talented ex-Company Commanders is, in my humble opinion, crazy.

          3. JLM

            I think you are hearing something I did not say. I certainly did not say that “military experience” is either the perfect or ultimate requisite experience for entrepreneurial or “C” level success. Nor did I say that I would limit my choice of talent in any manner.Having said that there are firms — such as Bradley Morris — who specialize in placing such folks and their business has never been better, so this is not a singularly held opinion on my part. There is a huge talent drain coming out of the military just now and these guys are being swooped up by corporate America in spite of the recession.I simply said that in my instance, company command presented every challenge I was later to be confronted with in order to be a CEO and thus was a good foundation for me.I do confess to being very attracted this type of talent but then I have a learned eye in evaluating OERs, combat decorations, school scores and OOM listings. I know what that stuff means and I can find the best of the best. But I am not hiring CEOs.I have had absolutely no difficulty in finding these guys because I know where to look and what to look for. I am an unabashed enthusiastic zealot of hiring the kind of guys I have described. Again, I am getting the screen for nothing.You have to realize that the Army, like American business, is quite complex and to characterize someone’s general military experience as a qualification is not the same as my observation about service academy grads, in the combat arms, who have been to Airborne and Ranger schools, with combat experience and having been successful company commanders. That is not everyone who ever put a uniform on. It is a very small slice of the entire military.I have long wondered why a guy would go through West Point or VMI or the Citadel and go into the AG Corps or Finance. These are not guys I am talking about.This is a system and methodology that works for me and it has propelled me to the pay window more than a few times.

          4. GlennKelman

            Yeah, I had the same thought, that I don’t know what to look for in ex-military, so hiring from there is more hit or miss for me. Part of the reason I posted my note is that I began professional life with a bias against folks who weren’t like me, based on my own pattern recognition, that turned out to be a bit off.When you said there’s no better prep for running a company than being a Company Commander, I took that to mean that Company Commander is the ultimate or perfect prerequisite, but you’ve been careful to explain what you mean more precisely than that. It does sound like an incredible trial by fire.Have you read the best essay of 2010, an address to the plebes at West Point:…I wonder if you’d like it?

          5. JLM

            I did read it but only after your mention of it. Thanks.Leadership is a funny thing as it is sometimes quite specific to the undertaking or the short term situation.I am not one who worships at the altar of leadership at the expense of management or with the supposition that a good leader can otherwise compensate for being a lousy manager.Unfortunately, you have to be good at both.Great leaders often have extraordinary managers on their staffs thus compensating for their own blind spots.Schools like West Point and VMI do a great job on teaching leadership but also in day to day activities which require a bit of leadership. A leadership laboratory on a day to day basis.Bringing those concepts to the business world requires a bit more subtlety and a change of dialect. That is why I like ex-military guys w/ MBAs. They have had an opportunity to decompress and to smooth out any rough edges.There an awful lot of guys who got into the military as a means to an end and though they were good soldiers and leaders it was always a temporary kind of thing. They were not lifers but they shoplifted the good stuff and spit out the bad stuff.

    4. ShanaC

      There are no words

    5. Donna Brewington White

      JLM, you have learned your lessons the hard way. No wonder you’ve learned them so well and live with such profundity.I sure hope you are working on a book.BTW, you ever read any Andy McNabb?

      1. JLM

        I know who he is but I have never read his stuff. I had the luxury of training with the SAS and they are very, very good. I may have to read his stuff. If I am not wrong, I think the is the only living Brit to receive both the DCM and MM. Pretty awesome stuff.

      2. RichardF

        If you are really interested in the SAS then I recommend General Sir Peter de la Billiere’s biography, “Looking for Trouble”

        1. markslater

          its tremendous. the other one (that slips my mind) is the former chairman of Swires group who join the foreign legion. i’ll try and find it.

          1. RichardF

            Do you mean Simon Murray Mark?

        2. JLM

          Thanks, I will read it.

          1. Donna Brewington White

            I still plan to read something on Marshall…and also have my teenage son read it even if I have to pay him!

        3. Donna Brewington White

          Thanks for the suggestion…my husband is fascinated by the SAS. A friend actually gave ME the first Andy McNabb book (Bravo to Zero) as a gift following a discussion we had about special forces. My husband nabbed it and read everything else by McNabb he could get his hands on. This sounds perfect as a follow on.

  20. Nick Grossman

    Totally unrelated to this post, but I figure this is as good a place as any: I would love it if the font size in the comments was bigger. I often read on my iPhone, and the font size in the body of the post is perfect, but the comments are tiny and hard to read.Related to the post, I would love to hear some leadership transition stories as part of MBA Mondays.

  21. Carlos Diaz

    I just made my transition this week stepping down from my CEO position at blueKiwi Software.I can say it’s not an easy decision to take but as you comment in your post this is a matter of timing. When your company grows up you need different skills to make the case and turn the opportunity you create into success. The objective becomes more and more operational and misjudgements could be dramatic.In my case I believe before being a CEO I’m an entrepreneur and I see a big difference in those two roles. When you create a start up you mostly need a visionnary leader. His role is to envision changes and turn incertain reality into business opportunity. This requires faith, passion and irrational decisions. When your market becomes more mainstream and pragmatic, you need more operating execution.At the same time and because revenue most of time the founder has to combine vision and execution but when you reach a new level of business the company can afford the recritment of an executive champion that will accelerate growth.If I can use an analogy to differentiate the founder and the CEO role, I would say the founder plays poker and the CEO plays chess. Sometimes you have to change the game.

  22. Peter Cranstone

    I learned about being a CEO from being an Airline Captain. I never forget the day I was sitting in the right hand seat (co-pilot) and asked the Captain what the big deal about being “Captain” was… he looked at me and simple said, “over here you take responsibility and you’re held accountable”.I never forgot those words. It takes time to become a good CEO. You have to have a moral compass, you have to know right from wrong, and occasionally it pays to be indecisive – patience is a virtue. But until you’ve really been tested and then held accountable and responsible for the actions of others under you, you’re not ready for the top job.It’s a lonely seat because it carriers enormous weight – everybody understands accountability and responsibility – when you comprehend them both (feel) then you’re ready for the job.

    1. JLM

      Your comment about the “loneliness” of being the CEO is a brilliant observation. Well played!That ILS is a bit more focused when it isn’t the sim and the clouds are really at 200, no?

      1. Peter Cranstone

        I remember the good old days 200 and “a half”, runway breaking action – poor. And by the the way, if you can see the lead in lights you can proceed down another 100 feet. Now that really gets your attention, especially when you have “souls onboard”.

        1. JLM

          I’m just a modest little Bonanza jockey with a few thousand hours but I know exactly what you mean.

  23. Mlswi

    I agree with you on Goog and Apple. Being a long time follower of technology though, I feel this is not such a black and white discussion as it all depends on the company. For example, is Yahoo better with Yang or are they just poorly positioned? Would Microsoft be better postioned with Gates back at the helm or was his bloated desktop vision part of the reason they seem to be a step behind? Is Dell better off now that Michael is back in the fold or are they too late in trying to evolve into a HPQ/IBM services orginization and making hasty M&A decisions? Is a sick Jobs really the best thing for Apple as this time? Is it possible he wasn’t the same Jobs of yesteryear? As in sports, is an old sick and tired Michael Jordan still the best option ? And in terms of Google, I truly believe the adult supervision role Schmidt played was absolutely necessary, but not anymore. I would bet he was over ruled many times by the other 2 and at this point in his life, who needs it. He has nothing to prove, did a good job in his 10 years riding a wave…why stick around now as it seems like the traditional model he experienced is changing. Facebook will be interesting as they go public and Zukerburg has to become much more accountable…do they bring in an adult to help him manage the street etc? I would think it would make sense.

    1. fredwilson

      yup, that’s why this stuff is so hard.

  24. Gaith Crunch

    well a bad example of removing the founder from the CEO position is Jerry Yang, before he was removed last time, he had a vision of one connected social Yahoo. at that time facebook was not massive as today. the board ditch him and brought a CEO who can get cash and cut cost. What happened now? Yahoo’s earning went well in the short term, they lost being number 2 destination to Facebook. Facebook ate Jerry Yang’s lunch bc of a bad board decision.I agree with you Vet, thought out my experience founding CEO bring growth and creativity. non founding CEO bring order but not vision.

    1. ErikSchwartz

      Jer was never CEO of Y! in its glory days. Tim Koogle was.

      1. kidmercury

        lol, dude’s last name was really koogle? way too ironic.

  25. Yarin Hochman

    Excellent post Fred! thanks for sharing your insights…

  26. Adrian Meli

    Fred, I really enjoyed this piece on leadership. I found the Google transition particularly interesting as in the tech world companies often lose their excitement after they have “made it.” It seems Google is partly addressing that issue by this move. Instead of having employees leave for Facebook or Twitter or whatever and losing top new hires to startups, Google may be able to reinvigorate itself (if it needed to) to help continue the entrepreneurial and creative culture that has made it so great. It is an interesting idea to go from an operating executive back to a creative executive and can’t think of other instances this has happened on this scale but I am sure a lot of people within Google are excited. – Adrian Meli

  27. Adam Hanft

    In 2005, when Amazon was celebrating its 10th anniversary, the commentariat was in its usual swirl, asking if it was time for him to step down for a “professional” CEO. At that time, I dedicated my Inc. magazine column to the subject, and warned against the conventional wisdom that entrepreneurs, by definition, could only take a company so far and had a limited shelf-life. Obviously Bezos has created enormous shareholder value since then. I thought the occasion of this week’s founder news, and Fred’s comments, warranted a link to this piece. Adam Hanft

  28. AskYourTargetMarket

    There has always a debate about whether it’s better to have a founder CEO or a business leader CEO. Some VCs are very dogmatic in their opinion on this issue. It’s refreshing to hear an experienced VC say that there are periods in a company’s lifetime when one choice may become better than the other. We have just added an experienced “execution” oriented executive as our CEO. Together, she and our 2 co-founders form a team that will wall through walls to execute but maintain our creative edge. Although she joined the team 2 years after we were born, we decided to include her as a co-founder. It feels that right.

    1. Aaron Klein

      Thanks for sharing your experience – and your service is great, by the way!

  29. gb293

    Can anyone give examples where it made sense to replace the founder-ceo? For example, http://www.palgrave-journal… shows that it is often a really bad idea. People have named many examples where replacing the founder was a disaster. So, when it is a good idea?I can understand the founder may not want to stay on as CEO for various reasons, but that doesn’t mean having them step down is good for the company. What does the evidence say?

    1. fredwilson

      i have dozens of examples where it was necessary and the correct move but i don’t want to paint anyone in a bad light

  30. Aa Bb

    Nice Article. Great Points

  31. Sramana Mitra

    Hi Fred,I have to say, I agree with one of the previous commenters, that Apple’s CEO transition should be fairly smooth at this point. May I offer a piece I wrote this week: Apple Doesn’t Need Steve Jobs; Tech Industry Does.…Also, here is an excellent article by Tony Scott on my blog from some time back: Is It Time For Your CEO To Go?…Regards, Sramana

  32. JLM

    Today I hit 2372 “comments” and 2000 “likes” — perhaps that is a sign that I need to retire or go back to work?

    1. Aaron Klein

      The lack of distance between the two numbers is a key metric of “Disqus influence”It’s the guy with 2372 comments and 2 likes who should retire 🙂

      1. fredwilson

        i’ve got 21,000 comments and 3500 likes. JLM has a higher hit rate than me, but i’ve got more likes than him 🙂

        1. Aaron Klein

          The ratio between the two numbers is interesting.Obviously not definitive because as a moderator you make lots of small engaging replies in addition to long, substantive comments. I do the same on my blog. We’re in the same neighborhood at 15-20%.JLM does most of his blogging here on the AVC platform and has an 84% ratio. 🙂

  33. paramendra

    A Founder CEO who has a great COO, a great operating executive, is the combo to go for. As for CEO for life, my favorite character in tech is Larry Ellison, and he has been CEO for life. But I do admit that he is a rare breed. That would not work in all or even most cases. But then excellence is a rare quality, the Larry kind is.

  34. Guest

    the transition from Steve Jobs to Tim Cook is fraught with risk as nobody can really replace Steve Jobs. The transition from Eric Schmidt to Larry Page is not really fraught with risk as this is just rearranging the deck chairs, and as all the three of them will continue with the company. In fact it might be better for the company as Larry Page is a founder and is presumably much much more emotionally involved with the company than Erich Schmidt could ever hope to be.

  35. Rohit Nallapeta

    @Fred: This may be a quirk of the American corporate in terms of CEO change, but I admired the GE’s CEO selection policy, though It has its share of ups and downs after the market changes. However I would like to bring to your notice about the CEO Rotation policy at Infosys. Its simply amazing how each of the founding member (7 in total) have created a very meritocratic process, where the initial founder assumed the role of founder and others trained as talented executives. The process of rotation has not affected the business so far in any negative manner. They have in-fact improved with 2 changes they have faced so far.

    1. fredwilson

      that’s interesting. i wasn’t aware of that approach at infosys. i will go read up on it.

  36. vruz

    is @ev’s letter publicly available somewhere, or is it still too private to be made public at this time?

    1. fredwilson

      it is private and should and hopefully will remain so

  37. David A Fenton

    Apple’s product roadmap should be fine for a few years. It’s the business negotiations that will be tested. Things like content deals with big media, negotiations with carriers and so on

  38. ginsu

    Just curious, by what criteria is the New Yorker note “the best piece on the Google transition”? I’m not challenging the statement, just wondering how people judge these things.

    1. fredwilson

      i felt it was well written, well researched, well sourced, and timely

  39. RichardF

    Ben Horowitz has a great blog post “Why we prefer Founding CEO’s” which is here…I completely agree with him. I’ve been mostly unimpressed with the professional CEO’s that I’ve seen replace founders, mostly following a big VC fund raising round.I understand that some founders are really not up to it or just don’t want the role because it takes them away from product but too often VC’s will initiate a change a change in the CEO as soon as they are able and that can just rip the heart and guts out of a company.Something else that VC’s sometimes do is “encourage” a founder CEO to employ VP of this or that who have worked in other VC portfolio companies, this can be divisive and adversely affect the company culture. Nothing against a recommendation when a company is looking to recruit a position but sometimes it’s used as back door route to getting their person in position.

  40. fredwilson

    this is a great comment Charlie, spoken from someone who has lived through these transitionsyou are right that founders often need to get their boards to wake up and take actiongood boards will listen to the foundersbad boards will not

  41. Mark Essel

    It’s easy to think of big corporations as well oiled machines, but they are a community of people gathered together for a given purpose. The greatest companies have a glue which binds them together and drives them to astounding heights. The organization leaders decide whether that’s execution, creative risk taking, revolution, evolution, and/or increasing share holder value. I prefer corporate cultures where every member is a leader and held responsible for their specialty or unit, yet have no trouble placing ego in the back seat by deferring to each other’s expertise.The right leadership doesn’t always succeed at milestones, markets as you’re well aware are highly unpredictable. But the best leaders hold themselves accountable to the same standards (or higher) that they demand of their team.Nice to see corporate leadership changing for the good of the company. Dynamic command structures suited to today’s battle.

  42. Paul Carney

    Excellent addition to a useful discussion. Your comment has helped me frame some of my thoughts as a co-founder. Thank you!

  43. Donna Brewington White

    “…and if you’re successful, you’ve developed a company of keepers of the flame.”That seems to be really key, Charlie. If that “flame” has become part of the fabric of the organization, doesn’t there seem to be more of a foundation in place for the many transitions a company will face over its lifetime?P.S. Knowing more of your story puts this comment in context. You “know of which you speak.” Sound wisdom.

  44. JLM

    Some folks are fire starters.Some folks are fire tenders.Some folks spend all their time pissing on the fire. Avoid these folks.

  45. Matt A. Myers

    Google still fails at the realization that branding is an important factor to marketing and stickiness.Ex: vs. Etsy.comFor example, “Like” means something pretty specific to everyone. It doesn’t let them necessarily “love” the brand then, because it’s priming ‘liking’ in the brain. Etsy? I love Etsy. Some pretty cool things on there, and I tell friends who are creating things about it. It allows the name to be what it needs to be to that person to stick in their, if owned by Google would likely be called :(I’m guessing the naming of ‘Google’ was a lucky fluke.

  46. Matt A. Myers

    I suppose it’s not those kinds of decisions I’d be worried about, but perhaps keeping track of that would still be a good enough overall gauge. I don’t yet know how “busy” things will be, so I haven’t had the chance to analyze if what will be in place is adequate – I look forward to that though. 🙂

  47. honam

    Charlie, goals and metrics are important. But the correlation between good decisions and good outcomes is not 100%. Bad decisions can lead to a good outcome (dumb luck). The right decisions can lead to a bad outcome (that’s life). You can say what counts is the results, no matter what. I’d agree that’s true to some extent. But when it comes to doing an assessment on the quality of the CEO (when contemplating a change), I don’t look just at the results, I try to look deeper. Sometimes it’s factors beyond anyone’s control which led to poor results. Sometimes, more time is needed to figure things out. The market might not be ready.Great people can fail and they can make mistakes too. It doesn’t mean we should get rid of them. Transitions are never easy and should be done with great thought and planning. Fred’s post is very balanced and thoughtful.

  48. JLM

    Most business success is the result of an iterative process of both gradually changing the azimuth but also going from plateau of performance to plateau of performance. It is 3D not 2D.When adjusting azimuth, you have to make half the turn and then wait for dynamic stability to take over and then make half the remaining turn and repeat. This is how business calculus works.The inexperienced CEO makes the entire turn and then has to turn back. Moderation and experiments are how lasting changes are made.

  49. Donna Brewington White

    Well said, Mark. Wow.

  50. Steven Kane

    i wish i didnt know what you mean

  51. JLM

    The earlier I come to work the luckier I get.In evaluating performance there is nothing relevant about the passage of 7 days, 30 days or 12 months.

  52. Charlie Crystle


  53. JLM

    Blood on their fingers.

  54. ShanaC

    we still don’t know if google handed over the emails of the wikileaks people…at least we know what happened with twitter. Don’t think of them as so positive quite yet

  55. fredwilson

    instant reblog on